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TMI Blog2012 (8) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... eloping and construction of housing project. 4. The lower authorities have failed to appreciate that sec. 80IB(10) does not require that the assessee himself should construct the housing project and it is sufficient if he undertakes the activity of developing and building the housing project. 5. The lower authorities have failed to appreciate that practically every major developer of housing project would outsource construction to third parties which act by itself would not make him any less a developer and would not make any him ineligible for deduction of sec. 80IB(10). 6. The lower authorities are not justified in falling to appreciate that sec. 80IB(10) does not insist on actual construction to be carried out by the eligible assessee and in term of Explanation, mere construction on works contract is in fact ineligible for deduction there under. 7. The lower authorities are not justified perversely holding that the appellant did not engage in developing but only contributed land for the project ignoring that apart from land contribution appellant incurred sizable expenditure in the development of housing project. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contribution towards the project at survey No. 26/1, Volagerahalli, Kengeri Hobli, Bengaluru South Talulk. was only contributing the land and incurring expenses for statutory approval. The AO was of the view that the deduction u/s 80IB(10) should not be allowed to the assessee since he was only a land owner and the said land was transferred to M/s Reddy Structures Pvt. Ltd. for joint development and that the assessee had not carried out any construction activity as could be seen from the expenses claimed in the profit and loss account and also in the balance sheet. The AO observed that the claim of deduction u/s 80IB(10) of the Act by the assessee was erroneous, since the assessee had not done any construction activity and only transferred the land. The AO was also of the view that any undertaking involved in development and house building project was eligible for deduction, therefore, the developer and the builder should invariably be the same person. According to him, the assessee had not followed the basic requirement of the eligibility criteria for granting deduction u/s 80IB(10) of the Act. The assessee explained to the AO vide letter dated 24.11.2008 that in the terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the AO. 6. Now the assessee is in appeal before us. 7. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee converted his agricultural land into non agricultural land and then converted into stock-in-trade on 1.9.2003 by putting the same for development by entering into joint development agreement with M./s Reddy Structures Pvt. Ltd. on 3.11.2003 and as per terms of the joint development agreement the assessee got 24% share while another developer got 76% share. He referred to para 2 of the assessment order and submitted that the AO himself admitted that assessee was a land developer. The learned counsel for the assessee stated that the assessee incurred expenses relating to the building project and the amount was spent by the assessee on the development. It was further stated that the assessee produced proof to show that the payments were made to BWSSB and KEB in connection with the development activities, therefore, the assessee was not simply a contributor of land but he is also a developer of the land, as such, the assessee was eligible for deduction u/s 80IB(10) of the Act. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the submissions of both the parties and carefully gone through the materials available on record. In the present case, it is not in dispute that the assessee was a land developer and this fact has also been admitted by the AO in para 2 of the assessment order dated 31.12.2008. The assessee entered into agreement with M/s Reddy Structures Pvt. Ltd., for development of housing project situated at survey No. 26/1, Volagerahalli, Kengeri Hobli, Bangalore South Taluk, measuring 1 acre and 31 guntas. The assessee got 24% share in the said project and sold 49 flats as mentioned in page No. 6 of the assessee's compilation, which is the copy of the bill and sale of flat during the financial year 2005-06. The assessee also incurred certain expense for electricity and water connection connected with the project and also made payment to BWSSB and KEB. The assessee entered into an agreement with M/s Reddy Structures Pvt. Ltd. In the said agreement dated 3.11.2003, copy of which is placed at page Nos. 1 to 13 of the assessee's paper book dated 28.2.2012, in the said agreement, it is mentioned at page No. 2 as under : "WHEREAS the first is engaged in property development of the schedule pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration. 12. In the present case, the AO denied the deduction to the assessee by stating that the assessee only contributed the land and had not carried out any construction activities. Now, we have to analyze the provision contained in sec. 80IB(10) of the Act. The said provision read as under : "The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of Mar, 2007 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project. 13. The Explanation has been inserted to sub sec. (10) of sec. 80IB w.e.f. 1.4.2010 with retrospective effect from 1.4.2001 vide Finance (No.2) Act 2009. The said explanation read as under : "For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government)." 14. On a joint reading of sub. sec (10) of sec. 80IB and explanation thereto it is clear that deduction as is allowable to an undertaking developing and building housing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, complied with all other conditions, which have to be fulfilled before claiming benefit u/s 80IB(10) of the Act. The builder has invested the money in the construction. It is after completion of the building in terms of the agreement, the assessee was given 22% share of the building area. It is after sale of the built area, in terms of sec. 80IB(10), the assessee is claiming deduction. As is clear from the joint development agreement, the undertaking of developing and building housing project was jointly undertaken by the assessee and the builder. Therefore, in respect of the residential units numbering 211 in all, the persons who undertook this undertaking are entitled to the benefit of sec. 80IB(10) of the Act in proportion to the share to which they are entitled to in the built up area." 15. In the present case also, the assessee entered into an agreement with M/s Reddy Structures Pvt. Ltd., for development and building of the housing project on the land belonging to him. The assessee contributed the land, undertook the developmental activities in the said land and thus complied with all other conditions which have to be fulfilled before claiming the benefit u/s 80IB(10) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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